The Nigerian Naira has experienced a significant shift in its performance, as reported by Bloomberg
The report highlighted the growing challenges faced by Nigeria’s Central Bank as the Naira continues to struggle against the U.S. dollar. According to Friday’s report, the Naira has weakened significantly, reaching a record low of 1,466.31 against the dollar – the lowest level since March 20. This concerning development is putting increased pressure on the Central Bank of Nigeria to further raise interest rates in an attempt to stabilize the situation.
The depletion of Nigeria’s foreign exchange reserves has been cited as the primary reason for the Naira’s decline. On Thursday, the available US currency amounted to a meager $84 million, representing a 50% drop from the previous day’s supply.
As per the report, the Nigerian Naira’s deteriorating performance is likely to put the Central Bank of Nigeria (CBN) in a tight spot. The report anticipates that this situation will compel the CBN to consider implementing another interest rate hike following its upcoming policy meeting on May 21.
The Central Bank’s decision to increase interest rates by 600 basis points in February and March proved beneficial for the Naira. During this period, the currency experienced a rebound from its low of 1,627 naira on March 8 to 1,072 in mid-April. This recovery can be attributed to the heightened interest in higher-yielding local assets among investors, demonstrating the impact of policy decisions on currency performance.
The Naira’s struggles extend beyond official markets, as evidenced by its decline in the unofficial market. According to Abubakar Muhammed, CEO of Forward Marketing Bureau de Change Ltd., the currency dropped 0.9% to 1,468 naira against the dollar on Friday. Muhammed attributed this slip to heightened demand from individuals and small businesses in Lagos, Nigeria’s commercial capital.
The Nigerian Naira’s depreciation extended to the unofficial market on Friday, as it lost 0.9% of its value against the dollar, dropping to 1,468 naira.
